Q4 2021 Lundin Mining Corp Earnings Call
Good day, and thank you for standing by and welcome to the Lundin mining fourth quarter 2021 results call and webcast.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please.
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I would now like to hand, the conference over to your speaker today, Peter Rocking Dale <unk>, President and C E M.
Thank you operator, and thank you everyone for joining lending mining's fourth quarter and full year 2021 results call.
I will draw your attention to the cautionary statements on slide two as we will be making several forward looking comments throughout the prepared remarks and likely during the Q&A.
Yesterday, we announced that our chairman Lukas Lundin will be retiring at the upcoming 2022 annual shareholders' meeting.
Our many stakeholders have benefited immensely from his vision insight and experience shared over a lifetime of leading many successful natural resource companies I.
I'd like to thank Lucas for his counsel and support as Lundin mining has grown over the past nearly three decades.
He is very constructive on the outlook of base metals and I share his confidence that lundin mining has the culture people and prospects.
Place to continue to deliver on his vision.
On the call to assist with the presentation and answer your questions are Ginnie Mcgee, our senior Vice President and Chief Financial Officer, Peter Richardson, Our senior Vice President and Chief operating Officer, and carrier Talbot, Our vice president of exploration.
On slide four I would like to touch on several of lending mining in 2021 highlight as they position us well for 2022 and beyond.
2021 was an excellent year for safety as measured by the total injury frequency rate.
We set a best ever read a 0.54 per 200000 hours worked we met or exceeded our most recent production guidance for all metals.
Recognizing that candidly, we had a challenging first nine months the balance of our mines operated in line with plans and all finished the year with strong fourth quarter results.
We achieved cash costs in line or better than guidance, including particularly low first quartile cash costs at eagle, while managing the impacts of global inflation.
Took advantage of the strong base metal price environment and set new records for annual earnings adjusted EBITDA and free cash flow.
Plant, we advanced the zinc expansion projected nebbish corvo at year end construction was substantially complete and commissioning is now underway.
At <unk>, we continue to progress on our expansion study and last week announced initial results are exciting new high grade Silver Bay Discovery, we will discuss this in greater detail later in the call.
Candle area internal study work evaluating expansion of the north and South sector underground mine from the current 14000 tons per day to 26000 tons has been completed and is being finalized.
At Eagle, we have completed internal study work on the <unk> zone, we believe the upper killed it technically and financially feasible and aimed to included in our life of mine plans later this year.
We remain focused on value creation through the disciplined allocation of our shareholders' capital.
Dividends declared in 2021 increased nearly 145% over 2020 and yesterday, our board of directors declared a regular quarterly dividend of <unk> Canadian per share and a semiannual performance dividend 11 Canadian cents per share.
Throughout the year, we opportunistically repurchased approximately four 5 million shares under our normal course issuer bid.
Lastly in late December we announced the acquisition of Jose Maria Resources Jose Maria project will complement our existing portfolio of high quality mines and will elevate our position to a major base metals producer with high quality low cost copper exposure.
Closing remains on track for the second quarter of this year.
In short, we are well positioned to deliver on our strategy of operating upgrading and growing a base metal portfolio that provides leading returns for our shareholders throughout the cycle and with that I would like to turn the call over to Jim to review our financial results.
Thank you Peter.
On slide five production of copper zinc nickel and gold in concentrate all increase in 2021 over that of 2020 in particular copper production increased nearly 15% year on year.
We produced over 450000 tonnes of base metals, and approximately 167000 ounces of gold.
We also sold nearly 410000 tonnes of base metals and approximately 157000 ounces of gold on a payable basis generating record annual revenue of over $3 3 billion.
We remain predominantly leveraged to copper with the metal generating 70% of the year's revenue.
Nickel and gold each contributing 97%.
Slide six presents a summary of our 2021 financial results and I will also touch on our fourth quarter results.
We benefited from significantly higher base metal prices in the fourth quarter and over the course of 2021 compared to the prior period.
Realized copper price of $4 70 success per pound in the fourth quarter, reflecting a 37 cents per pound a prior period adjustment.
Prior period pricing adjustments for zinc nickel and gold were also positive though less impactful.
Details of the pricing adjustments are in our MD&A.
2021 revenue of $3 3 billion increased more than 60% compared to 22 months.
Primarily owing to increased sales volumes and higher realized metal prices.
Gross profit of $1 $4 billion was 175% higher year on year.
Yeah.
Attributable net earnings from operations were $1 six.
Per share for the year and 31 cents per share for the fourth quarter.
Record adjusted earnings were $1 11 per share for the year and $38 per share for the fourth quarter.
Fourth quarter adjustments included a write down of the chip had an ore stockpile and recognition of insurance proceeds from the <unk> 'twenty 'twenty power interruption details of these adjustments are in our MD&A.
We generated record adjusted EBITDA of $1 $9 billion in 2021, and nearly 120% increase over 2020, which includes over $620 million generated in the fourth quarter.
2021 cash flow from operations was $1 5 billion, a 160% increase over 2020.
Fourth quarter capital expenditures on a cash basis, when you're adding $155 million, bringing the total spend for 2000 $21 million to $532 million lower than the most recent guidance of $575 million.
We ended the year with nearly $600 million in cash and equivalents and a net cash position of over $560 million.
As of February 17, 2022. These has further improved to $650 million in cash equivalents and $620 million of net cash.
Lastly, our board of directors declared regular quarterly dividends and made a semi annual dividend totaling 39 cents Canadian per share in 2021. This is nearly 145% increase over total dividends declared in 2020.
And as Peter mentioned yesterday, our board approved the next quarterly regular dividend and semiannual performance dividend, which together totaled 27 Canadian per share.
We believe our regular quarterly dividend is sustainable throughout the metal price cycle and considering your capital requirement.
As we progress with our growth projects, we expect limited semi annual performance dividends to be declared during the development period I will now turn the call to Peter Richardson to discuss our operations.
Thank you Jim here, starting with candle area on slide seven the operation had a strong finish to the year producing nearly 45600 tonnes of copper and approximately 26000 ounces.
At a cash cost of $1 31 per pound of copper in the fourth quarter. This was the best quarterly production since the third quarter of 2017.
As mentioned with the release of our production results in early January the positive trends of improvement and great discrepancy continued each month in the fourth quarter and averaged approximately 4% pace has continued thus far in 2022.
Candle area as 2022 production cash costs and capital expenditure guidance are unchanged as previously disclosed production is expected to be one of the greater in the second half of the year, primarily owing to the copper grade profile.
So from the open pit ore mining is to continue primarily from phase 10, pushback with initial oil production from phase 11 pushed back later in the year.
Initiatives to Debottleneck, the pebble crushing circuit are continuing as planned and will increase no capacity starting in 2023.
As mentioned by theater internal study work evaluating expansion of the north and South sector underground mines from current 14000 tons per day to 26000 tons is now being finalized the study work indicate that tactically and financially robust projects under the current royalty and taxation structure.
Lastly on the exploration front, we have over 54000 meters of drilling and a $50 million of expenditures planned for candle area. This year much of this is to focus on growing and upgrading underground resources, where we have demonstrated success in the past.
Moving to Japan on Slide eight Japan had a good fourth quarter operating in line with plan.
Our new annual mill throughput record was set with $24 1 million tonnes processed.
This was.
With this we exceeded in copper production guidance achieved the top end up gold production guidance and cash cost guidance for the year.
<unk> 2022 production cash costs and capital expenditure guidance are all unchanged.
Unchanged at.
As previously disclosed production has to be weighted to the second half of the year, owing to the grade profile and seasonal operating conditions.
While we considered the impact of a typical rain season in guidance Ciabatta as received significantly amounts of rainfall to start this year. The team has managed as well and Thats continues to operate safely.
On the exploration and expansion front, we continue to make progress with our study work. We are very excited about the discovery of Silva announced last week and and potential implications as we evaluate our advanced several expansion scenarios. Our planned exploration expenditures for this year at Ciabatta, our $10 million, which includes 60000 meters of drilling.
I will now turn the call over to <unk> Talbot, our vice president of exploration to speak to the cell where discovery.
Thank you Peter moving to slide nine we're very excited to have announced the discovery of soba last week.
So it was located approximately 15 kilometers from the current chip powder plant and along strike from the previously identified for me the sector Nishu.
Initial drilling intersected shallow high grade copper gold mineralization and has returned intercepts of copper and gold, which are multiples of what is presently been process such product.
Upon our acquisition of <unk> in mid 2019. This concession was identified as a high priority and we were able to acquire the exploration license and federal auction process mid last year.
The first two drill holes completed in September confirmed the presence of shallow copper gold mineralization.
Last week, we completed drilling 47 holes and have received assay results for 29 of them.
The current locations and several of the highlight intercepts as shown on the next slide.
Moving to slide 10, the horizontal footprint as the presently defined mineralized area measures approximately 750 meters by 650 meters and importantly remains open in all directions.
We are evaluating and interpreting the results as we continue to explore for extensions of the system.
There are currently three drill rigs testing areas to the northeast and west of the discovery area and this slide shows the location of the complete holds where assay results are pending.
We plan to aggressively and methodically drilled this sector as part of the $10 million exploration program outlined for chip out of this year.
Additional drill rigs and approximately 50 holes are planned to test northeast along strike towards the four weakest sector and seen in the planned color locations on this slide.
While at an early stage, we are very pleased with its initial discovery believe it supports our view that many opportunities exist to increase the size and quality of our mineral resource base the ciabatta.
The implications that this new high grade system may have for ongoing expansion studies will be evaluated at this discovery balls Jeremy.
Now I'll turn the call back to Peter.
Thank you Chiara moving to Eagle on Slide 11, Eagle had a good quarter and a strong year mill.
Mill throughput and grades were impacted in the fourth quarter when compared to prior quarters, given mine sequencing that at times limited ore production rates.
Mill maintenance was pull forward during this time.
We achieved annual nickel and copper production guidance and significantly beat full year cash cost guidance at a negative $1 24 per pound of nickel with the help of a greater than forecasted byproduct copper prices.
With minimal capital expenditures of $60 million for the year Eagle generated approximately $290 million of cash.
2022 production cash costs and capital expenditure guidance is unchanged.
As previously disclosed production has to be weighted to the second half of the year, owing primarily to the expected grade profile.
And can turn all work studies indicate that the upper kilos that wasn't seen in the figure on this slide is technically and financially feasible.
Look to incorporate upper killzone into the mineral R&R estimate that in 2022.
In addition, we are continuing to.
Hello. This is one of the operators as anyone on the line.
Hello. This is one of the operators is anyone on the line.
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Hello.
For full year capital expenditure guidance was below plan, primarily on timing of payments.
Construction of the zinc expansion project that was substantially complete at the year end.
<unk> was 2022 production cash costs and capital expenditure guidance unchanged as previous disclosed while copper production is to be well.
Honestly weighted to the first half of the year given the copper grade profile zinc production has to be second half weighted as production from zest has ramped up over the course of the year.
This year, we intend to initiate feasibility study level work evaluating the potential to develop this in bladder copper deposit and improve the copper production profile, having recently purchased the outstanding interest in the deposit.
Slide 13 shows construction and commissioning progress some of the underground aspects of that during the fourth quarter during the quarter the materials handling and crushing systems, where commission with first ore in December that service water piping construction with finalized all the watering piping supports installed and electrical rooms commissioned.
The photos on slide 14 show the surface construction progress.
During the quarter, we finalized all process plant circuit completed commissioning and startup of the backfill cyclone completed commissioning of the third tailings thickener and continued pace field expansion works constructions of the zinc expansion project with substantially complete at year end and commissioning is now underway.
Lastly on the operation front. Thank you one continued to perform very well, we achieved annual zinc production guidance and beat full year cash cost guidance 2022 production cash costs and capital expenditure guidance is unchanged as previously disclosed zinc production has to increase in 2022 and 2023 over 2021.
Primarily on increasing head grades zinc production has to be weighted to the second half of the year.
Additionally, we are evaluating the potential of utilizing sequential flotation to further improve concentrate grades and metal recovery rates with minimal capital expenditure.
Exploration efforts continued this year with primary focus on increasing mineral resources at albeit negative on over 20000 meters of exploration drilling is planned as part of the 2022 exploration program with that I'll turn the call back to Peter.
Thank you Peter Slide 16 provides a summary of our current guidance on an operational basis. This is unchanged from our previous disclosures I will note that a global enterprise resource planning software project to optimize and standardize our systems was recently approved and is included in the other capital expenditures and.
In aggregate 2022 total capital guidance is for $655 million.
Full year exploration expenditure guidance remains at $45 million, including over 170000 meters planned exploration drilling.
On slide 17 closings the Jose Maria Resources acquisition remains on track for the second quarter of this year.
Zoom Rio project will complement our existing portfolio of high quality mines, and well update our position to a major base metals producer with high quality low cost copper exposure. We are excited to have this project come out of our ownership in the coming months.
In summary on slide 18, our operations performed well in the fourth quarter, most notably with quarter over quarter improvements at candle area and nourish parvo.
For the year, we were able to take advantage of that base metal price environment setting annual records for earnings adjusted EBITDA of $1 9 billion and free cash flow of over $1 billion.
All of this free cash flow, we directly returned over 227 million through our dividend framework not including the regular dividend and performance dividend declared yesterday at the same time, we indirectly returned over $40 million for the repurchase of our shares in the open market.
We remain focused on value creation through a disciplined allocation of our shareholders' capital.
We're also excited to welcome a new SVP of technical services and growth a VP of technical services and soon a VP of projects to our team there additions as well as recent senior hires in our operation enhance the technical expertise across our organization.
With growth opportunities in each of our assets and the recent addition of Jose Maria we are well positioned to deliver on our strategy and drive shareholder returns and with that operator, I would like to open the lines for questions.
As a reminder to ask a question. Please press Star then the number one on your telephone keypad.
And your first question comes from <unk> with Morgan Stanley .
Yes Hello.
Good morning, and thanks for the presentation. The first question is on Chipotle in light of the high grade discoveries that you announced can you share with US your latest view on the most attractive expansion option here and clearly with San Jose Mari acquisition.
I would like to also ask how is the time line of the question Maria and potential to bring in a partner could influence your decision around the size and the timing of the Chipotle expansion. Thank you.
It's Peter Rockenbach ill address the question with respect to Jakarta, Our focus right now is on a potential expansion to 32 million tons per annum. We were looking at multiple different scenarios and we've narrowed it down to that specific one we are still revealing some auctions with respect of development.
I have an underground opportunity, but we'll have to wait and see how that plays out and with respect to the more recent discovery, obviously, that's going to be ongoing as Kieran pointed out. It is open in all directions. So as we continue to drill there and get resolved that information will feed into any.
Potential expansion scenarios at chip had I expect the timeline for completion of the study will be later this year. We had initially wanted that to be a bit earlier, but we were reviewing multiple opportunities. So.
This is why now we've narrowed it down to the existing one this will not impact how we move forward with Jose Maria.
You mentioned you asked a question about the funding.
I think I should point out that we ended the year with a very strong cash balance.
Clearly in these commodity price environments, we're going to have considerable free cash flow. In 2022. We have currently have 800 million dollar line available, which there's a possibility of increasing that as well and since the announcement of Jose Maria there have been a number of different inbounds.
Other corporate streamers.
I won't get too specific but a number of different parties that would be interested in partnering on that.
Yeah, we have a lot of conviction on how as you Marianne we need to make sure that we are going to get the best deal for our shareholders. So we'll be patient on that and through the passage of time, we'll figure out what the best funding opportunity yet.
Great. Thanks, very much without the.
The second question you already talked about the strong free cash flow, but if I look at your guidance you suggest that the muscle separations will have a softer H, one and a stronger H two.
Is there any flexibility to bring some of the high grade material forward given to the very high commodity prices or you don't have that level of flexibility to enhance you rely to some extent on commodity prices things thrown me to the second half to monetize the higher grade material.
Where it's Peter Richardson here.
The mine plans are built on a specific sequence. So it's.
It's a challenge and difficult to change that around and potentially causing more problems and challenges going forward. So you know we have our plan and then we aim to execute according to the Atlanta.
That makes sense. Thank you and just a last question from me on Constitutional reform process in Chile, we've seen lots of fraud the color proposals over the past several weeks.
When do you think we'll have better visibility on what's included in the draft Constitution do we have to wait a few more weeks or could it take several months before there is more visibility on that on the final proposals.
I would assume that all occur after March 11th when the new government comes into place.
So look for a timeline after that to get better clarity.
And the same goes we'll see the royalty bill.
Yes.
Great. Thanks very much.
Your next question is from Daniel major with UBS.
Yes. Thanks.
Thanks for the questions.
Yes, I guess the first one just to clarify on <unk>.
And thanks for.
So narrowing the scope of the expansion that you're currently thinking on the table 24 to 32 am I right that the new discoveries.
Independent.
From our perspective with timeline and inclusion in this expansion in wood.
Just a little bit further.
<unk> of the asset beyond that that's the first part of the question and the second one.
Can you give us any preliminary sort of capex guidance range, you might be thinking of for.
So ballpark for expansion to 32 million tons at Chipotle.
Yes, so regardless of the new discovery, we are moving forward.
With the planned to go to 32 million tonnes per annum.
We will look on whether or not so if we get to a situation where it can have its own.
Facilities or it's just a matter of trucking the ore, but we will move forward, regardless on the Capex side.
We'll get better clarity on that towards the back half of this year.
Okay. Thanks, and then.
Just follow up on a high demand of signal.
The acquisition, yet, but can you give us any.
Indication on the time line about when you would be able to make a fuss cuts review of in particular, the capital budget for the project.
And give us a sense of.
You know the sort of magnitude of upside relative to the I think to your point 1 billion that came out in mid November 2020 study.
Study on the asset.
Yes, I mean, theres a lot of work going on as we speak.
Many people probably wouldn't be aware that Jose Maria actually has assembled a pretty world class team a lot of the people were ex Freeport and key in the construction of 10-K about adhesion grasberg.
Theyre working in conjunction with some of our more recent hires that lundin as mentioned earlier on the call the SVP of technical services.
As well as the VP of projects. We've also got alignment between a number of different.
Areas Finance, we can go with your mall, so we'll be working with.
With Jose Maria Fluor's also involved I think from a timing perspective, we hope to come out with clarity on the path forward in Q4 and that will obviously be the time in which will also speak more specifically to what the capex will be.
Okay. So Q4 of this year.
The sort of timeline looking at okay, great. Thanks, so much for the questions.
No problem.
Your next question is from Oren <unk> with Scotia Scotiabank.
Hi, Good morning, just following up on the last question about Jose Maria.
Kevin you've had a couple of months now to take a look at Jose Maria.
I'm wondering how much confidence you have in the in the Capex estimate of $3 1 billion at this point.
Well, we looked at Jose Maria for quite a considerable amount of time before the deal.
We made our own assumptions on that Capex prior to the acquisition.
And.
I won't give specific numbers, but I will say the assumptions, we made were higher than 3.1.
Okay.
Obviously I would think those assumptions are going up just given the inflationary pressures, we're seeing in the market as well is that fair.
Oh, you know we've had discussions as recently as yesterday with floor and the numbers that we assumed during our due diligence are still intact.
Okay Alright.
We're not a or I mean, it clearly inflation is a concern out there, but it's something we're monitoring closely.
Okay. Thanks, Peter and just in terms of sort of milestones for Jose Maria. So you just mentioned I guess Q4 for an update on your capital estimate.
Is that the same or are you still expecting that.
Q4 for timing of a new I guess, the stability agreement in Argentina related to the project.
We are hoping that some of the milestones that are key to the project will be completed much sooner than that the Jose Maria team has in fact, leaving.
This weekend heading down to Argentina to meet with both provincial and <unk>.
Federal government officials.
Some of the key topics the stability agreement environmental permits and in export taxes are the purpose of the shaft.
I think.
I think two of the three items they are making very good progress on clearly there was a bit of focus in Argentina with respect to the IMF and.
So now that that's getting better clarity.
I think things will pivot back to the housing Maria team.
Okay, and then just finally would it be fair to say that.
Things like streaming and partnering or likely going to come after you have that agreement with the Argentinian government.
We're looking at all opportunities.
Potential ways to finance this and even though some have already been presented to us as we speak I think.
It would be better for lundin mining to enter those negotiations after better clarity in Argentina.
Yeah, Okay. Thank you.
No problem.
Your next question is from Bryce Adams with CIBC capital markets.
Hi, Good morning, all thanks for the presentation I wanted to ask a few questions related to the stockpile write down at $65 million that's potter.
So how many tonnes of ore were impacted and what was the driver for the rock down as that re sampling metallurgy or something else just hoping that you could add a little extra color to that please.
Sure I can I can take that shouldn't hebei the write down of stockpile.
Additional information and as you noted.
Now some volumes grade recovery estimates so it's a combination of all those things.
It's based on new processes that we implemented in 2021 to just get better information, including we get the laser scanner.
The stockpile in estimating the density we did some great sampling and and also reflecting on on it.
It kind of results from that better estimated our recovery rates expectations. So I would say the biggest factor in that was actually the change in that recovery rate change.
Changing it.
I think we had around 72% to 68% again, given the oxidation of low grade and that had an impact of about $60 million.
On the overall net realizable value.
Of the low grade stockpile.
Sampling.
I think the great lowered a bit as well and that had I would say probably the next largest impact.
Overall, I think what we have to you what's what's kind of important to keep in mind here is that because when <unk> purchased Jakarta, we have to fair value the stockpile.
It was already at a high value as opposed to when we build up the stockpile exact costs. So there's headroom. If if there is any change to lowering that net realizable value.
That lowering in the net realizable value had a direct impact on our book value of that that we took the write down.
Okay. Thanks, that's good detail can you can you say, how many tons were impacted.
Yeah.
It's about 8 million tons.
Yes.
Got it that's all for me Thanks, a lot.
Your next question is from Lawson Winder with Bank of America Securities.
Thanks, operator, good morning, and thank you for the update.
<unk>.
Yeah, maybe maybe if I could just come back to you.
<unk> two <unk>.
But better understand the path forward so.
When you committed to the $32 million.
Or the extension of 32 million tons, obviously that without a study.
Is there a risk that aren't amount of risk, but is there a possibility that.
That changes just given that there isn't a finalized study at this point.
Well no we are in the process of a study as we speak sorry, so maybe that wasn't clear and we are working close with.
I believe it's S. N C. Intertanko hatch. So no. This is this will be based off of our study.
Okay and so the study you're working on now is it is only focused on the $32 million. So just to be clear on that.
Correct, Okay. Okay.
Okay great.
Thank you for that.
Yes, just a couple a couple of other questions. So with the ERP the additional $25 million.
Spend this year.
Will that spend continue into 'twenty, three and 'twenty, four and perhaps beyond that or is this just a one year thing.
No. It will continue its it's.
It's a global project. So we are doing is phases across our operations. So it is about a three year project.
So the spend will continue and overall expect it to be around $80 million in total.
Oh, great thanks for that and.
And then just.
Looking at costs in a candle area from from a couple of points of view one from from an FX point of view.
And the other from a power point of view. So my understanding is that you are.
Your new power contracts will take effect next year, so will that have any positive or otherwise negatively impact on costs.
And then two in terms of the peso.
Can you provide any sensitivity in terms of your cost guidance around increases and decreases in the peso and I'm just asking because it's I mean, the peso high decline and it didn't quite a nice tailwind on cost through.
Through 2021, and now it is starting to rebound and then maybe just remind us.
What percent of operating capital costs are in Chilean pesos.
Yes, so I can start with that so yes, the power contract.
Lowered the electric electricity costs, I'd say probably around.
Excess of 60, 50, 60% lowering of the electricity cost.
And on the peso about 50% of our costs are in pesos. If you work that into our cash cost that should give you.
A good indication on the sensitivity.
And in terms of your power costs, so you're going to get to 50%.
A reduction.
What is my memory correct in that about 10% of your cost totally on site are powered.
Yeah, roughly that yes.
Okay, and then maybe if I might just sneaking one more question on <unk>.
<unk>.
The timeline on that I mean, it certainly potentially intriguing project here.
A little different than the others given that it's you know just copper and silver.
What can we expect the study on this sometime and when can we expect some more detail on that thanks.
Yeah. So it's Peter Richardson here, so we will be commencing that oh.
Update of our feasibility study, which will so it's a we've done feasibility study on this before so we're taking them a privilege of updating those studies will be commencing them in Q2 and hope to have a final product by the end of this year.
Thank you very much.
Your next question is from Stephen I'll now with core Mark Securities.
Okay. Thanks, guys actually my questions have been answered thanks again.
Your next question is from Dalton Barreto with Canaccord.
Thanks, operator, good morning, everybody a couple of questions for me I want to start with ship order in the.
This 32 million tonne per annum expansion.
Peter Correct me, if I'm wrong, but that's the same kind of order of magnitude like Humana had decided right and I'm just wondering after all this time why you settle on that number after all.
So they I believe I'm just going from memory had three different studies. They were looking at in this would've been the top end of the study we are reviewing.
For us we looked at it as the one that currently.
It provides the best economics.
Yeah.
Okay in India or original study.
There was a substantial amount of capex capital involved in moving infrastructure to access the <unk> ore and it was supposed to kind of kicking around this time, how should we think about that.
Well, it's Peter Richardson again, so that's part of that study that we're doing so we're reviewing options on a on the relocation of the infrastructure both timing costs and.
Yes timing and costs primarily.
So that's part of this study to review again.
Got it Okay, and then just moving on to Candelaria in the UGG brand study it sounds like it's almost fully baked internally.
And I'm wondering is a green light on this study contingent on the new fiscal regime and that's really all that's waiting and then part b of that is.
How robust year, the economics under the current regime.
Or in other words.
How much of an increase in the tax rate can be absorbed.
Yeah ill give a stab at that so basically yeah. The study is complete or.
Pretty much complete it we'll take it from 14000 tonnes up to 26000 tons and that would add an incremental 21000 tons of copper per year and Theres also some ESG benefits. If you will because by going underground you will see a reduction in the amount of dust noise and things of that so under the current tax.
Situation. It does show a positive IRR in the double digits.
But it would be prudent for us to wait to see what kind of royalty changes come through and then we can factor that into the model and determine the impact but.
To your point, we are going to wait until we see what the changes may be for a path forward if they if the.
The changes communist still dictates a strong IRR, we will move forward with the project.
Yeah.
Okay, Great and then just.
Last couple Juan Jose Maria here.
The investment agreement and the stability agreement you guys are looking at.
Jose Maria has been leading the charge on that one for some time now.
Yeah. There was some talk that it would be specific to Jose Maria then there was some talk that it could be more of a countrywide mining code pad change and just wondering is the discussion now back specifically to Jose Maria in terms of FIS.
Fiscal regime.
Yes.
The government may be looking at it from their own side.
Across the whole country, but Jose Maria is working specifically on it for them.
And I think that you know.
They've come to an agreement if you will on the terms it just needs to be approved at the federal level.
Yeah.
Okay, Great and then just last one for me.
Once the acquisition of Jose Maria is complete.
Well, Adam Lucky and have a role at Monday morning.
Yes, we havent determined.
Specifically, but Adam will be involved I think his relationships in the country are.
Our exceptional I've been Argentina with him I've met with the governor with him a number of other government officials and so I think it will be key for him to help manage those relationships on a going forward basis.
That's great. Thanks, guys. That's all for me.
And there are no further questions at this time.
Okay. Thank you operator.
Just in closing I make a quick comment.
Lundin.
<unk> mining is really well positioned for 2020 to each of our assets as we pointed out in his presentation has an opportunity to continue to add further value and I think our people are very focused on achieving this so I would like to personally. Thank the employees of lundin mining for all their hard work and dedication in particular through a challenging time with this global pandemic.
And thank you everyone today for joining the call.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
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